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Remarks at Information Technology and Innovation Foundation Conference

Thursday, April 19, 2012

Commerce Deputy Secretary Rebecca Blank
Remarks at Information Technology and Innovation Foundation Conference

Thank you, Peter [Coy]. And thanks to ITIF for organizing this. It’s great to be on this panel to lay out some of the key issues for the rest of the day’s discussion.

Innovation is one of the key issues for anyone who is concerned about long-term American competitiveness. That’s certainly true for all of us at the Commerce Department and throughout the administration.

The title of this panel is, “Where is America and Why?” Recently, the Commerce Department tried to answer that very question.

The America COMPETES Act–which passed last year–directed us to compile a report about the competitiveness and innovative capacity of the entire U.S. economy. We released that in January, and we have copies of it here today. We discussed a number of what we called “alarm bells” in that report:

The current federal share of research spending is half what it was in the Eisenhower administration.

Today, America ranks 14th in the world in terms of the percentage of college graduates we produce. We used to be number one.

The World Economic Forum now ranks our infrastructure 24th. We used to be in the top 10.

The good news, however, is that none of these trends is inevitable or unchangeable. There are clear policy avenues that we can take to reverse the trendlines on all of these fronts. That’s exactly where the administration has been focused.

I’d like to highlight four areas where the government has a clear role to play in supporting innovation and competitiveness in the private sector. Long-term American competitiveness will require investments in these key areas.

I realize we are facing large government deficits–I’m an economist and strongly believe we need to worry about that. But these are areas where we need to invest to assure long-term future growth, which will only help our long-term budget situation as well.

First, we should invest more federal dollars in basic research.

Basic research and development is an area that is under-provided in the private sector; every major developed country recognizes the need to put public dollars into R&D.

In the U.S., the federal government has played a crucial role in the development of key innovations in the 20th century. The Internet, satellite communications, semi-conductors and other job-generating advances would not have been possible without the wise investment of taxpayer dollars.

Unfortunately, since 1980, federal funding for basic research has dropped from 70 percent of all basic research funding to just 57 percent.

To reverse that trend, the president has set of goal of doubling federal funding for basic research and development by 2016.
In the 2011 and 2012 budgets, and in the proposed 2013 budget, there are substantial increases in funding for NSF, DOEnergy labs, and for the National Institute of Standards and Technology at the Department of Commerce, all of which support important core scientific research.

The fact is, governments around the world are increasing their public support at universities and research institutions. So must we.

Second–and to build on our R&D support–we must support the transfer of new technologies to help increase our productivity, especially in areas such as manufacturing. Production and innovation are inextricably linked.

Manufacturing companies in the United States account for 70 percent of private sector R&D and employ the majority of domestic scientists and engineers. Manufacturing R&D is also the dominant source of innovative technologies that are adopted into the service sector.

The government has played an active role in this space. For instance, for nearly 25 years, the Manufacturing Extension Partnership at NIST has funded centers around the country that consult with private sector companies facing technological problems, and put them in touch with scientists and engineers who can help solve those problems.
The Advanced Manufacturing Partnership–launched last summer–is another important way we are working to advance tech transfer. This public-private partnership uses the convening power of the government to bring together top research universities with manufacturing partners. As anyone who has spent time at a university knows, one cannot simply assume that scientific discoveries will magically find their way into applications.

There is a role for both universities and the government to work together and help make the connections that lead to the transfer of technologies from lab to marketplace.

Third, we must assure that the American workforce has the education and skills needed to support a growing and innovative private sector. A globally competitive economy requires a globally competitive workforce.

Among other things, we need a large and growing group of so-called STEM workers–that is, workers with training in science, technology, engineering or mathematics. These are the workers who will be at the forefront of inventing, applying and producing new technologies throughout the economy.

Over the last decade, growth in STEM job openings climbed three times as fast as other jobs. In recent years, however, only about 13 percent of U.S. college graduates got degrees in the STEM fields. That is much lower than other countries like Korea and Germany, where 25 percent of their students receive STEM degrees.

The president’s 2013 budget invests $3 billion in programs across the federal government that promote STEM education, a three percent increase in funding.

Looking forward, we need to focus on two areas in particular:

  • Increasing the share of women and minority students in STEM fields. These groups are seriously underrepresented right now. As long as more than half of our population can’t find a path to science-related fields of study, we will have inadequate numbers of STEM graduates overall.
  • Taking better advantage of the interest of non-U.S. citizens with STEM degrees, who want to work in the U.S. The administration has proposed "stapling"–that is, guaranteeing a "green card"–to any foreign student who graduates from a U.S. university in a STEM field and has a job offer from a U.S. company.
  • We need to ensure that our intellectual property protections remain strong.

Patents, trademarks, and copyrights are critical tools that help commercialize game-changing ideas.

The Department of Commerce released a report last week on the role of IP in the economy–this report was also made available to everybody at this conference. The IP report shows that nearly 35 percent of our GDP–more than $5 trillion–comes from about 75 IP-intensive industries. Furthermore, these industries support the employment of about 40 million workers.

The report also made clear that IP protections have a ripple effect, driving innovation and competitiveness in indirect ways.

For example, a newly-patented technology in computer manufacturing could increase the demand for products in related industries, such as semiconductors.  

For all these reasons, the landmark America Invents Act–signed into law last year by President Obama–is now playing a crucial role in helping us build a 21st-century IP system.

For example, the U.S. Patent and Trade Office now has the ability to spend all of its fee collections. This allows the office to hire more examiners and board judges to reduce the backlog of patent applications and challenges.

We also launched a fast-track program for those businesses that need fast action on a patent. For a higher fee, PTO will guarantee a 12-month decision, and small businesses get a discount on that service.

And, as the global gold standard in IP protection, PTO continues to work to harmonize IP laws internationally. This will help not only with economic trade and cooperation overall, but also in specific areas such as reducing counterfeiting and piracy abroad.

Overall, we are making progress in this area. While patent filing in 2011 grew by 5 percent, our patent backlog actually dropped by about 10 percent.

There are, of couse, many additional policies that we could discuss that will help ensure that our entrepreneurs and businesses of all sizes have the best possible environment to do what they do best: grow, innovate and create jobs.

This includes the promotion of successful growth strategies such as assistance to companies to expand their exports to new areas of the globe.

It also includes removing barriers to investment in the U.S., through major endeavors such as corporate tax reform, where President Obama has proposed a clear way to lower rates and simplify corporate taxes.

And, of course, it includes providing our entrepreneurs with more tools to start and grow a business–which we saw two weeks ago with the new JOBS Act that provides them with more flexibility with crowdfunding and IPOs.

To succeed in all these areas, we must have the will to implement and to sustain the policies that will allow the United States to continue its economic leadership into the 21st century. The voices of people and organizations, like those represented in this room, will be important in developing a consensus about the importance of these policy issues.

While the government action by itself cannot assure a healthy and competitive private sector, effective government policies must be part of any equation, providing the infrastructure that will help assure the labor force and the innovative base that is necessary to maintain a globally competitive private sector.

What we need to do is, I believe, relatively clear and eminently doable. It will depend upon our ability to forge bipartisan consensus about the importance of these issues in the policy space, however. For that, gatherings such as this one are very important and I thank ITIF again for today’s discussion.